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The word derives from the Venetian phrase s-ciào vostro or s-ciào su literally meaning "I am your slave".[1] This greeting is analogous to the medieval LatinServus which is still used in a large section of Central/Eastern Europe. The expression was not a literal statement of fact, but rather a perfunctory promise of good will among friends (along the lines of "at your service" in English). The Venetian word for "slave", s-ciào ([ˈstʃao]) or s-ciàvo, derives from Medieval Latinsclavus, deriving from the ethnic "Slavic", since most of the slaves came from the Balkans.

This greeting was eventually shortened to ciào, lost all its servile connotations and came to be used as an informal salutation by speakers of all classes. In modern Italian language, the word (s-ciào in Venetian, s'ciao in Lombard, ciao in Italian) is used (in addition to the meaning of salutation) as an exclamation of resignation (also in a positive sense), as in Oh, va be', ciao! ("Oh, well, never mind!"). A Milanesetongue-twister says Se gh'hinn gh'hinn; se gh'hinn nò, s'ciào ("If there is [money], there is; if there isn't, farewell! [there's nothing we can do]").

The Venetian ciào was adopted by Northern Italian people during the late 19th and early 20th century. Later it become common elsewhere in Italy with the spelling ciao. It has since spread to many countries in Europe, along with other items of the Italian culture. In the late 19th and early 20th centuries, the greeting (spelled 'chau' and only meaning 'bye') spread to the Americas—especially Colombia, Uruguay, Paraguay, Bolivia, Peru, Ecuador, Chile, Brazil, Venezuela, and Argentina—largely by way of Italian immigrants. In today's Cuba, "ciao" as a closing in letters has largely replaced the more traditional "adiós," with its religious implications, for many young people.[citation needed] 'Ciao' has also permeated Australian culture, becoming a popular greeting among descendants of Italian immigrants.

In contemporary Italian usage, ciao is interchangeable for both an informal hello and goodbye, much like aloha in Hawaiian, salām in Arabic, shalom in Hebrew or annyeong in Korean. In Italy, ciao is mainly used in informal contexts, i.e. among family members, relatives, friends, in other words, with those one would address with the familiar tu (second person singular) as opposed to Lei (courtesy form); in these contexts, ciao can be the norm even as a morning or evening salutation, in lieu of buon giorno or buona sera, deemed too formal among friends, relatives, or the very familiar. When used in other contexts, ciao may be interpreted as slightly flirtatious, or a request for friendship or closeness.

In other languages, ciao has come to have more specific meanings. The following list summarizes the spelling and uses of salutations derived from ciao in various languages and countries.

Slovak: čau (variations: čauko, čaves, čauky, čaf); mostly as "goodbye", but stands in for "hello" primarily in informal written communication (text messages, emails) and phone calls because it is more character-efficient/shorter and more hip than the Slovak "ahoj"

Spanish: in Argentina and Uruguay the word chau is the most common expression for "goodbye". In Chile, chao is the standard farewell. In Spain, where "adios" (with a religious etymology as "goodbye") is the common expression, people can use chao as an original way of saying goodbye.

The dominant use in Latin America uses the term solely as farewell rather than as a greeting.

The greeting has often several variations and minor uses. In Italian and Portuguese, for example, a doubled ciao ciao/tchau tchau means specifically "goodbye", whilst the tripled or quadrupled word (but said with short breaks between each one) means "bye, I'm in a hurry!".

Pronounced with a long [aː], it means "hello, I'm so glad/amazed to meet you!" (be it sincere or sarcastic) in Italian, and a sarcastic or humorous use of "bye!" (cf. American English) in Portuguese. That is not a limited use, as it can also be used in Italian to express sarcasm at another person's point of view about one topic, especially in case that opinion may sound outdated, sì, ciao! meaning "that's totally weird!".

In all these cases, however, the special meaning is conferred more by the vocal inflection than by the modified use.